Essentially, Nakamoto’s blockchain technology put down the foundation to replace centralized authority and created an open source, peer to peer trust system. This decentralized system is applicable to more than just banks, it can be applied to any industry with a centralized body and this technology is what we use at Bitbond to facilitate peer-to-peer lending.

Basic Blockchain breakdown

The core innovation behind the first generation of cryptocurrencies is the blockchain. Understanding what a blockchain is, will help you understand why Ethereum and cryptocurrencies are so successful.

I found blockchain best explained by this TEDx talk. However, I would simply describe blockchains as information stored online that is unchangeable, unhackable and available to everyone who needs access. Thus creating an accurate documentation of business transactions i.e a leger.

Essentially blockchain technology can improve information sharing and the reliability of the information. For example, if you were buying a new house and needed an accurate historical record to make an informed purchase, currently in the centralised system you would have to contact a numerous people to get a full history. This is time consuming and the information you receive may have been tamperedd with….. Suddenly a failed mould inspection, magically turns into a pass.

So basically, a blockchain prevents these information changes for happening, as the information is essentially unbreakabley “chained” together so no data can be removed. Blockchain technology is constantly running and the chain of information is checked against a variety of anonymous computers (nodes). Thurs ensuring all the information is correct and matches against the other node checks, thus creating a accurate and reliable ledger that is accessible all the time.

What is Ethereum?

First of all there are 3 very similar words you may of heard surrounding Ethereum, the Ethereum token, Ether and Ethereum itself. All of theses are different but linked! I know that maybe hard to wrap your head around, but I will break it down for you.

The History of Ethereum

Before I break everything down, here is a brief history of Ethereum to provide some context.

2016: July the debate over retrieving the lost $50, caused a split as retrieving the money would mess with the fundamentals of blockchain technology and alter the Ethereum code. So Ethereum split into two groups (two separate blockchains) called Ethereum (ETH) & Ethereum Classic (ETC)

2016: Ethereum (ETC) worked on its blockchain and prevented further spam attacks

Ethereum ETC is the more popular plateform and what I will be focusing on in this article.

But here is a basic Ethereum history if you want more detail – there’s a great info-graphic!

Let’s look at Ethereum

What is Ethereum?- Ethereum is the platform itself, think of it like Facebook which is the platform you go too to contact yours friends. Ethereum would be the platform you would go to, to develop and create a decentralized app (DAPPS).

If I lost you at decentralized this just means it’s not owned by any central body i.e the information you upload onto Facebook can be changed and blocked by Facebook itself .So, Facebook is centralized . Ethereum works differently what you develop i.e ‘upload’, cannot be edited or influenced by Ethereum. It is controlled by you and can’t be influenced by Ethereum, therefore the ‘uploads’ are just held on the platform, making it decentralized.

Simply the app parts of DAPPS stands for an application (app) and an app is just a specialized program- like the apps on your phone. Therefore a DAPP is a specialized program that is developed on the Ethereum platform using smart contracts. There are many DAPPS on Ethereum, have a look at some interesting ones at Coindesk.

Ethereum’s flexible extensible blockchain makes it relatively easy for developers to build and launch their own DAPPS and creates a unified ecosystem for all these applications. Roughly 92% of assets listed on coinmarketcap were built on Ethereum. Meaning Ethereum offers the promise of being the one chain to rule them all, making it a very popular platform accounting for the high valve of Ether (ETH), 1 ETH = $912.

Ether

Hopefully you understand Ethereum a little better, so now I will explain Ether. Think as Ether as the fuel or the currency for the Ethereum platform. Similar to how you would need to change dollars into pounds to make a purchase from the US to England, you need to change your currency to Ether to make a purchase in Ethereum. This Ether is used to develop DAPPS and it also keeps the application running like fuel would. Ethereum created this system as an incentive for developers to create high quality applications (DAPPS) as wasteful codes cost more.

Essentially Ether is the fuel the powers DAPPS on Ethereum, it is also the currency needed to developed on the platform, like all currencies Ether can be exchanged.

Last but not least what is the Ethereum Token?!

So, if Ethereum has Ether as its currency/fuel.Why does it need a Ethereum token?

You need Ethereum tokens to work within the DAPPS. Now, that sentence may sound confusing but keep on reading and all will become clear.

Remember the DAPPS are decentralized applications, meaning they all have functions of their own. If you want to use this function you would use an Ethereum token to pay, as you would be ‘paying’ the developer who created the DAPP and the developer would be paying Ethereum with Ether.

If you still don’t fully understand, this explanation by Blockgeeks is the best I’ve come across: “Remember that time you went to the water park? Remember how they took your money and tied a band around your wrist which you used to gain access to all the rides in the park and to buy food as well? In this example the water park is the DAPP, your money is Ether and the band is the Ethereum token”

Therefore, the Ethereum token is a representation of a currency.

Ethereum tokens can be ‘renamed’ by the DAPP developer, and sold in Token sales to raise capital for DAPP development. These token sales are often referred to as ICO’s (initial coin offerings). ICO’s are currently trending and because the majority of DAPPS are created on the Ethereum platform means there is potential growth for Ethereum’s popularity.

Conclusion | Introduction to Ethereum

Now you should have an understanding of what Ethereum is and the differences between the buzzwords surrounding it.

As mentioned before, ICO’s and token sales are a big part of why Ethereum is so successful and has huge potential for growth. If you want to invest in an ICO or a Token sale, ensure it is a legitimate project and not a scam by doing research on the ICO. Check crypto forums like bitcointalk (don’t be afraid of its retro layout it is a great forum and worth exploring!). Also you can read up on the steps involved with investing in an ICO and Token sales here.